Accounting Standards for Private Sector Not-for-Profit Organizations

Revenue – Upfront Non-refundable Fees or Payments

Summary

In December 2019, the AcSB issued amendments to Section 3400, Revenue. The amendments provided additional application guidance on the requirements in Section 3400 related to various complex revenue topics, including determining when to recognize revenue from upfront non-refundable fees or payments. The effective date for the amendments was initially set for fiscal years beginning on or after January 1, 2021, but was subsequently deferred to January 1, 2022, in response to the COVID-19 pandemic. The amendments are applicable retroactively.

As entities started to apply these amendments, the AcSB heard of application challenges from stakeholders – particularly member benefit organizations. These stakeholders were concerned about the decision usefulness of deferring upfront non-refundable fees over long member durations. They also expressed concerns about the associated cost of applying the amendments.

The AcSB considered the feedback and decided that more time is needed to research the concerns raised by stakeholders and the underlying contracts. Therefore, the Board is proposing to defer the effective date of the amendments relating to upfront non-refundable fees or payments to January 1, 2025, while it researches the effects of the previously issued amendments. This research will inform the Board’s decisions on how to address the concerns raised by stakeholders.

Staff Contact(s)

Jamie Goodman, CPA, CA Principal, Accounting Standards Board

+1 416 204 3294

[email protected]

Project Status

Information gathering

Completed prior to June 2022
Approving project

AcSB approved the project and developed a proposal in June 2022
Engaging Communities

AcSB issued Exposure Draft, Revenue – Upfront Non-refundable Fees or Payments in July 2022
Deliberating feedback

Amendments were approved by the AcSB in October 2022
Final pronouncement

Final amendments issued in the CPA Canada Handbook – Accounting on November 15, 2022

News

May 1, 2024

News

AcSB issues amendment to Section 3400, Revenue

The AcSB issued an amendment to Section 3400, Revenue, to indefinitely defer the effective date of previously issued amendments relating to upfront non-refundable fees or payments. Earlier application is permitted. The amendments also introduce a disclosure requirement for some upfront non-refundable fees or payments.

April 11, 2024

Meeting, Webinar

Webinar – Domestic Accounting Standards Update (Spring 2024)

Are you a Canadian private enterprise, not-for-profit organization, pension plan, an advisor to one, or a user of their financial statements? Register for our upcoming webinar to learn about current accounting standards projects and recent amendments in Parts II, III and IV of the CPA Canada Handbook – Accounting. Join us on May 15, 2024 (English) or May 16, 2024 (French).

November 3, 2023

Document for Comment, News

AcSB Exposure Draft – Revenue – Upfront Non-refundable Fees or Payments

The AcSB is proposing to indefinitely defer the effective date of amendments relating to upfront non-refundable fees or payments. Our Exposure Draft proposals also introduce a new disclosure requirement for upfront non-refundable fees or payments recognized in revenue when the enterprise recognizes the fee or payment in revenue upon entering into an arrangement. Read the Exposure Draft, and submit your comments by January 31, 2024.

November 15, 2022

News

Handbook Update – Revenue – Upfront Non-refundable Fees or Payments

The AcSB has issued an amendment to Section 3400, Revenue, to defer the effective date for previously issued amendments relating to upfront non-refundable fees or payments from fiscal years beginning on or after January 1, 2022, to fiscal years beginning on or after January 1, 2025. Earlier application is permitted.

July 15, 2022

Document for Comment

AcSB Exposure Draft – Revenue – Upfront Non-refundable Fees or Payments

The AcSB wants your feedback on its proposed amendments to Section 3400, Revenue, applicable to private enterprises and not-for-profit organizations. The Board is proposing to defer the effective date of the amendments relating to upfront non-refundable fees or payments to January 1, 2025, while it researches the effects of previously issued amendments. Submit your comments by August 15, 2022.

Meeting & event summaries

April 2, 2024

AcSB Decision Summary – March 5-6, 2024

The AcSB deliberated feedback on its Exposure Draft, “Revenue – Upfront Nonrefundable Fees or Payments.” The Board approved the issuance of the amendments, subject to a written ballot. The Board plans to issue the amendments in Part II of the Handbook in May 2024.

October 12, 2023

AcSB Decision Summary – September 20-21, 2023

The AcSB continued its discussion on feedback received from its Private Enterprise Advisory Committee and Not-for-Profit Advisory Committee on concerns raised with Section 3400, Revenue related to accounting for upfront non-refundable fees or payments. The Board approved an exposure draft to indefinitely defer the effective date of these amendments, with early application permitted, until their Evaluating the Preface project is complete. This exposure draft will also propose a new disclosure requirement for entities recognizing upfront non-refundable fees or payments. The Board expects to issue this exposure draft in November 2023 with a 90-day comment period.

August 17, 2023

Private Enterprise Advisory Committee Notes – July 26, 2023

The Private Enterprise Advisory Committee received an update on the AcSB’s recent decision to issue an exposure draft to amend Section 3400, Revenue. The proposed amendments are to indefinitely defer the effective date of application guidance and illustrative examples relating to accounting for upfront non-refundable fees or payments, and to introduce a new disclosure requirement for entities recognizing upfront non-refundable fees or payments in revenue entirely up front. The Committee recommended adding further details in the Basis for Conclusions document to clarify why the Board is proposing the new disclosure requirement. The Board will consider the Committee’s feedback at its meeting in September 2023. The Board plans to issue an exposure draft in October 2023.

May 17, 2023

Not-for-Profit Advisory Committee Meeting Notes – May 2, 2023

The Not-for-Profit Advisory Committee received an update on the AcSB’s March 2023 discussions and tentative decisions to address stakeholders’ concerns with recent amendments to Section 3400, Revenue, related to accounting for upfront non-refundable fees or payments.

The Committee provided feedback on the AcSB’s tentative decision to issue an exposure draft to indefinitely defer the effective date of these amendments, with early application permitted, until the project on Evaluating the Preface is complete. The Committee also provided feedback on the Board’s tentative decision to propose a new disclosure requirement in this exposure draft for entities recognizing non-refundable initiation and life membership fees in revenue up front.

The AcSB will consider the feedback from its Not-for-Profit Advisory Committee and Private Enterprise Advisory Committee at the June 2023 Board meeting.

November 29, 2022

Private Enterprise Advisory Committee Notes – November 10, 2022

The Private Enterprise Advisory Committee received an update on stakeholder comments on the AcSB’s Exposure Draft “Revenue – Upfront Non-refundable Fees or Payments.” This Exposure Draft proposed deferring the effective date of the previously issued amendments for upfront non-refundable fees or payments to periods beginning on or after January 1, 2025.

The Committee then discussed possible alternatives to address stakeholder concerns about the amendments. Committee members considered whether additional illustrative examples, application guidance or an exception to the guidance would result in more decision-useful financial reporting outcomes for financial statement users.

The Committee also discussed whether any potential exception to the upfront, non-refundable fees guidance should apply to for-profit entities and non-for-profit organizations that have transactions with similar characteristics.

The AcSB will consider the feedback from its Private Enterprise Advisory Committee and its Not-for-Profit Advisory Committee at a future Board meeting in Q1 2023.

October 11, 2022

AcSB Decision Summary – September 14-15, 2022

The AcSB completed its deliberations of stakeholder feedback on the Exposure Draft, “Revenue – Upfront Non-refundable Fees or Payments.” The Board approved the issuance of the proposal to defer the effective date of the previously issued amendments to Section 3400, Revenue related to upfront non-refundable fees or payments subject to drafting and a written ballot. The Board plans to issue the amendments in mid-November 2022.

June 22, 2022

AcSB Decision Summary – June 22-23, 2022

The AcSB continued its discussion on feedback received from its Private Enterprise Advisory Committee and Not-for-Profit Advisory Committee on recent amendments to Section 3400, Revenue, related to accounting for upfront non-refundable fees or payments. Stakeholders indicated that the amendments sometimes result in information that is not decision-useful, particularly for entities collecting non-refundable initiation or life membership fees. The Board decided to issue an exposure draft to defer the effective date of these amendments while the Board analyzes the issues raised by stakeholders and determines what, if any, action is required to address these concerns. The Board expects to issue an exposure draft on July 15, 2022, with a 30-day comment period.

Disclaimer

This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal voting process.